Business ideas are great. They make us feel like we are on to something.
Our adrenaline spikes and we want to get started right away.
But this is not always the smartest thing to do.
Usually it is best to take a step back before we go all in.
Here is how you can refine and test your idea to make sure you can actually build a business out of it:
1. Get so clear on your business idea that you can describe it in one single sentence:
You can use this template: (“My company, _(insert name of company)_, is developing _(a defined offering)_ to help _(a defined audience)_ _(solve a problem)_ with _(secret sauce)_”).
This exercise helps you to get really, really specific and forces you to clearly articulate how you are delivering value to a specific group of people.
2. Go out and share it with as many people as you can
Though this might sound counter-intuitive at first (people could steal your idea!!), it is one of the best strategies to get direct feedback and refine your idea. Talk to as many different people as possible. Take a good look at the people that love the idea vs. the ones that think it is stupid — this can be a great indicator for refining your target audience. Listen closely to the objections (for example: “This is a great idea. But have you thought about…?”) and use them to refine your business model. Talking to people and getting good feedback also fuels your motivation to start executing. Just make sure you get the person’s unfiltered and uninfluenced opinion and listen attentively without interrupting — this will help you get the most value out of this exercise.
3. Survey your Target Market
Set up a simple questionnaire to get a better understanding of your target customers. You can use an online tool like Survey Monkey or even just work with Google Forms.
Touch on the following aspects in your questionnaire:
- Need: Are they aware of the problem you are solving and do they see your product/service as something they need?
- Existing products or services that they are using (+ what they like and don’t like about them)
- Willingness to Pay
- What product features and characteristics are important for them
- Where they usually go to buy products and services like yours (e.g. online store, their doctor etc.)
- Any other things you need to know about your customers, as long as you keep it sweet and simple
4. Make mind maps to explore every aspect of the idea
Pick different starting points and brainstorm everything that comes to your mind about your idea, your target customer and the industry in a structured way. This is an explorative exercise — so think outside the box and jot down you ideas unfiltered! Doing this will make it a lot easier for you to think through every aspect of your business plan (see point 4).
Here are some examples:
- Make a mind map of the target customer (e.g. Millennials working in corporate jobs): What are their challenges and struggles? How do they spend their days? Which tools and devices are they using? Which platforms do they spend time on?
- Make a mind map of the broad idea: What are existing solutions in the market? What is your USP? How does the product work? What are the major benefits? What are the product features? What are ways to monetise your idea? Who could be interested in the idea (customers, partners, investors)?
- Make a mind map of the industry: Who are the players in the market? How are they connected? What are the products that are sold? Who is buying these products? How does the value chain look like?
5. Create your Business Plan/Pitch Deck
Some people might not agree with me on this one. But I believe this step is a very crucial one in the early stages of a business. Your business plan does not need to be a fancy 100-page document. It can literally be a 2-page Google Sheet or a 7-slide PowerPoint presentation answering the following questions:
- What is the problem you are solving?
- What is your solution (describe your product or service)?
- How will you make money (the business model)?
- What is the market size (calculated by looking at your target group and how much they are spending on products like yours)?
- How does the competitive landscape looks like (who else is doing it)?
- Why is your solution/product/service better (do you have superior technology/expertise or is it cheaper/better/faster/etc.)?
- What is your go-to-market plan (how will you acquire customers)?
- Rough Roadmap or Project Plan: Which milestones need to be reached in the next 6–12 months to make this idea happen?
If you don’t have a valid business idea, you will really struggle to set up a proper business plan and might need to go back to the drawing board.
- You realise your product/service is not actually solving a problem (it can still be a valid business idea, but you need to understand that you are building a luxury product/service)
- You realise that it there is actually major flaws in how the product/technology works and need to think it through
- You realise that the idea is great but can’t actually be build into a profitable business due its economics
6. Get expert feedback on your business plan
Make sure your business plan or pitch deck is short but comprehensive, to the point and easy to understand. Then, get feedback from experts. After you have talked to ANYONE and EVERYONE in point 2 and refined your idea, you are ready to seek qualitative feedback from people that know what they are talking about.
This could be:
- Industry Experts
- Successful Entrepreneurs
- Coaches and Consultants with industry or entrepreneurship focus
- Highly targeted potential customers
7. Test your Prototype with a select group of people
Develop a first, basic version of your product or service. This is your MVP (Minimum Viable Product). Depending on the complexity of your product this could mean you are manually simulating a process that technology will do later on. If it is a food product, you can get people to try the first recipe. If it is a service like consulting or coaching, do practice sessions for free. Basically, think of the simplest version of your product and service that possesses its core features and starting getting real feedback from potential customers. This process is integral to refine your Product-Market Fit. Furthermore, it allows you to build up a small group of supporters than can help push your business once its launched.
Alternatively, you can build a landing page or list your product on a crowd-funding website to collect pre-orders that will help you proof demand and fund your product development.
Don’t just develop a product and throw it on the market. Use a mix of open idea exploration, structured documentation, market research and real feedback from potential customers to polish your idea, refine your business model and adapt your product based on the wants and needs of the customer.
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